>> WELCOME TO "ON THE RECORD."

I'M MICHAEL AARON.

THIS IS A BUSY TIME FOR STATE LEGISLATURES.

A STATE BUDGET HAS TO BE ENACTED THIS MONTH, OR ELSE STATE GOVERNMENT SHUTS DOWN.

THERE ARE NO EASY ANSWERS TO THE HANDFUL OF THINGS THAT STILL DIVIDE DEMOCRATS FROM REPUBLICAN AND DEMOCRATS FROM DEMOCRAT.

HERE TO REFLECT ON WHERE THINGS STAND ARE TWO MEMBERS OF THE ASSEMBLY BUDGET COMMITTEE.

JOHN.

GOOD TO SEE YOU JOHN AND JOHN.

LET'S START WITH THE SCHEDULE FOR GETTING THIS BUDGET PASSED.

I'VE BEEN READING THIS WEEK THAT IT'S GOING TO COME UP IN COMMITTEE ON MONDAY AND GO TO THE FULL HOUSE ON THURSDAY.

IS THAT STILL THE PLAN?

>> AS WE SIT HERE TAPING ON FRIDAY, THAT'S STILL THE INTENTION.

THERE ARE ONGOING MEETINGS BETWEEN OUR STAFF, SENATE STAFF, GOVERNOR STAFF.

I SUSPECT THEY LIKELY GO THROUGH THIS WEEKEND AND HOPEFULLY BY MONDAY WE'LL BE IN A POSITION TO STRIKE A DOCUMENT.

MONDAY COULD BECOME TUESDAY, BUT WILL CERTAINLY VOTE ON A BUDGET ON THE 20th.

>> THE 20th IS THURSDAY.

>> CORRECT.

>> AND THAT GIVES THE GOVERNOR PLENTY OF TIME TO DEAL WITH WHATEVER YOU HAND HIM, EITHER LINE IT, LINE ITEM VETO IT, VETO IT OUTRIGHT, OR NEGOTIATE WITH THE SENATE PRESIDENT AND THE SPEAKER.

IS THAT PART OF THE INTENT TO GIVE THAT MUCH ROOM FOR NEGOTIATION?

>> WELL, THE DOCUMENT THE GOVERNOR WILL RECEIVE FROM US IS NOT GOING TO BE A SURPRISE FROM HIM BECAUSE THERE ARE GOOD COMMUNICATIONS TAKING PLACE.

BUT HE WILL HAVE TEN DAYS TO DECIDE WHAT TO DO WITH IT.

HIS OPTIONS ARE SOMEWHAT LIMITED BECAUSE BY OUR RULES, BY CONSTITUTIONAL RULES, HE CAN TAKE EXPENDITURES IN, BUT HE CAN'T PUT REVENUE IN.

THAT'S BEEN IN THE PAST.

CHRIS CHRISTIE HAD THAT SHOWDOWN THAT THE SENATE PRESIDENT CALLED HIM A MEAN OLD MAN A FEW YEARS AGO.

>> CALLED HIM MUCH WORSE THAN THAT.

>> THIS IS A FAMILY SHOW.

I DIDN'T WANT TO REHASH ALL OF IT.

THE BOTTOM LINE IS THE GOVERNOR WILL HAVE TEN DAYS, BUT THE DOCUMENT RERECEIVES WILL NOT BE A SURPRISE TO HIM.

>> IT WILL BE VERY CLOSE TO WHAT HE PRESENTED WITH TWEAKS.

>> HE'S TO GET WHATEVER IT IS FOR THE APPROPRIATIONS SIDE.

HE WILL GET A LARGER DOCUMENT THAN HE PRESENTED TO US AND THAT'S NOT HAVING TO DO WITH THE MILLIONAIRE TAX.

I THINK HE'LL SEE AREAS HE WILL LIKE WHICH MAY BE ENHANCEMENT TO NEW JERSEY TRANSIT AND OTHER THINGS THE PUBLIC HAS BROUGHT TO OUR ATTENTION AS VERY IMPORTANT.

HE'S GOING TO GET A GOOD BUDGET.

HE SENT US A GOOD BUDGET.

WE'RE GOING TO SEND HIM BACK A BETTER BUDGET.

>> SOME YEARS THE REPUBLICANS IN THE MINORITY DECIDE TO VOTE FOR THE DEMOCRATIC MAJORITY BUDGET AND OTHER YEARS THEY CAN'T BRING THEMSELVES TO.

WHAT'S THIS YEAR GOING TO BE?

>> WELL, I GUESS WE'LL KNOW MORE ON MONDAY WHEN WE SEE THE DOCUMENT THAT THE DEMOCRATIC MAJORITY'S WORKING ON WITH THE GOVERNOR'S OFFICE AND THE SENATE.

OBVIOUSLY WE'LL CONSIDER WHAT'S BROUGHT TO THE TABLE.

THERE ARE AREAS THAT WE DISAGREE.

THAT'S JUST THE WAY IT IS.

I MEAN, WE CERTAINLY WOULD LIKE TO SEE MORE REFORM WITH REGARD TO LONG-TERM HEALTH CARE PLANNING AND BENEFIT PLANS AS THE SENATE PRESIDENT TALKED ABOUT.

I THINK WE WOULD BE VERY INTERESTED IN HEARING MORE ABOUT THOSE THINGS.

BUT YOU KNOW, THERE'S THINGS IN THE BUDGET THE GOVERNOR WROTE THAT ARE A LITTLE OFF FROM LAST YEAR WITH REGARD TO SCHOOL FUNDING.

I THINK IT'S SOMEWHERE IN THE NEIGHBORHOOD OF $144 MILLION LESS THAN IT WAS OF AN INCREASE LAST YEAR.

HE'S -- >> MY UNDERSTANDING IS THOSE NUMBERS ARE HE INCREASED BY 300 MILLION LAST YEAR -- >> 350.

>> -- 350, AND THIS YEAR HE'S INCREASING YET AGAIN BY 200 MILLION.

YOU THINK HE SHOULD INCREASE IT BY MORE THAN THAT?

>> I WOULD -- BEFORE WE VENTURE INTO NEW PROGRAMS -- AND I'M NOT GOING TO DEBATE WHETHER WE NEED TO DO PRE-K OR FREE COMMUNITY COLLEGE.

WE'RE STILL PROBABLY 900 MILLION SHORT GIVE OR TAKE DEPENDING ON WHOSE MATH YOU USE UP TO A BILLION OR MORE OF FUNDING.

>> FOR K-12.

>> FOR PUBLIC SCHOOL, K-12 WHICH IS THE CONSTITUTIONAL REQUIREMENT WE NEED TO MEET AND HASN'T BEEN MET YET.

THIS IS THE OPPORTUNITY TO GET THAT PAID.

>> YOU WOULD LIKE TO SEE MORE SCHOOL FUNDING IN THE BUDGET.

>> I WOULD LIKE TO SEE SOME OF THAT RETURN TOD THE PROPERTY TAX PLAYERS.

WE DID IT WITH REGARD TO RESHIFTING MONEYS AND GETTING BACK ON TRACK WITH THE SFRA OVER A FIVE-YEAR PERIOD I BELIEVE.

AND SOME SCHOOLS GOT MONEY TO CATCH UP WITH THEIR ENROLLMENT AND WILL GET MONEY OVER THE NEXT SEVERAL YEARS TO CATCH UP.

BUT THEN WE'RE GOING TO GET ABOVE OUR LOCAL FAIR SHARE AND FULLY FUNDED AND HITTING ADEQUACY.

I BELIEVE WE NEED TO TALK.

I THINK THIS IS SOMETHING WE PROBABLY AGREE ON IS MAYBE SOME PIECE OF LEGISLATION DOWN THE ROAD WHERE WE WOULD SAY OKAY, YOU'RE AT ADEQUACY.

YOU'RE AT YOUR LOCAL FAIR SHARE.

THE REST OF IT SHOULD GO BACK TO THE OVERTAXED PROPERTY TAX PLAYERS.

SOMETHING LACKING IN THIS DISCUSSION FOR THE LARGE PART IS PROPERTY TAX RELIEF.

>> THE GOVERNOR WANTS TO PROVIDE A LITTLE BIT MORE PROPERTY TAX RELIEF.

HE WANTS A MILLIONAIRE'S TAX.

AND AS PART OF THAT MILLIONAIRE'S TAX, HE WOULD PROVIDE A ONE-TIME TAX CREDIT OF $125 TO EVERY HOUSE HOLD IN NEW JERSEY THAT EARNS LESS THAN $250,000 A YEAR.

HE'S USING THAT AS A CARROT TO TRY TO GET HIS MILLIONAIRE'S TAX.

I THINK YOU BOTH ARE AGAINST THE MILLIONAIRE'S TAX.

I'M GUESSING YOU ARE BECAUSE ALL THE DEMOCRATIC LEGISLATIVE LEADERSHIP SEEMS TO THINK IT'S NOT NECESSARY.

AM I RIGHT?

>> WELL, THE KEYWORD IS NOT NECESSARY AT THIS TIME.

THE GOVERNOR'S IDEA OF DIRECT CREDIT ON TO THE FILING OF INCOME TAX IS A LAUDABLE GESTURE.

BUT I THINK PEOPLE WILL TELL YOU THAT $125, ANYTHING WOULD BE WELCOME, DOESN'T STRETCH THAT FAR IN A HOUSE HOLD.

AND THERE SEEMS -- IT WOULD SEEM TO ME THAT IF WE'RE GOING TO DO SOMETHING, IT SHOULD BE MORE IMPACTFUL TO THAT SIDE OF THE ACCOUNTING COLUMN THAN $125.

AND WE'RE NOT IN A POSITION TO DO MORE.

WE'VE HAD GIMMICKS AND REBAITS ON AND OFF THROUGHOUT THE YEARS.

WE DO FUND THE REBATE FOR SENIORS.

>> THAT'S SENIORS THAT EARN LES -- >> THAT'S THE FREEZE PROGRAM AND A REBATE PROGRAM.

MONEY IS ADDED TO THAT.

THERE'S RELIEF COMING.

WE WOULD ALWAYS LIKE THERE TO BE MORE.

BUT I DON'T THINK THE IDEA OF $125 CREDIT ON AN INCOME TAX FORM WAS PERSUASIVE ENOUGH TO SAY WE SHOULD DO AN ADDITIONAL MILLIONAIRE'S TAX.

I REMIND EVERYBODY WE DID A MILLIONAIRE'S TAX DURING THE THE FIRST YEAR.

>> WENT UP TO 8.9%.

>> STARTING AT 500,000.

>> IF YOU MAKE MORE THAN 500,000, THE TAX RATE ABOVE THAT IS 8.97.

AND THIS NEW MILLIONAIRE'S TAX WOULD KICK IN AT $1 MILLION OF INCOME, AND IT WOULD BE 10.75%.

>> AND LAST YEAR WE COORDINATED WITH THE GOVERNOR AND DID DO AN INCOME TAX SCHEDULE ADJUSTMENT FOR OVER 500 -- $5 MILLION A YEAR.

SO, WE HAVE DONE MILLIONAIRE'S TAXES.

>> THE GOVERNOR SAYS WE NEED THAT MONEY.

WE NEED IT FOR EDUCATION.

YOU SAY YOU WOULD LIKE TO SEE MORE EDUCATION FUNDING.

WE NEED IT FOR NEW JERSEY TRANSIT.

YOU SAY THERE WILL BE MORE MONEY FOR NEW JERSEY TRANSIT IN THE BUDGET.

WE NEED IT FOR INFRASTRUCTURE, INVESTMENT, INNOVATION.

YOU'RE SAYING THAT WITHOUT THE MILLIONAIRE'S TAX, THERE WILL STILL BE ENOUGH TO ADDRESS SOME OF THOSE NEEDS?

>> AND HAVE A SLIGHTLY LARGER SURPLUS THAN THE BUDGET THAT THE GOVERNOR PRESENTED TO US IN HIS ORIGINAL BUDGET.

>> IS THAT BECAUSE REVENUES GREW IN THE SPRING?

>> THE ADDITIONAL TAX ON CORPORATIONS, HIRING CORPORATIONS, PERFORMED VERY WELL.

IT'S ONE AREA OF THE BUDGET THAT DID WELL.

HERE'S AN IMPORTANT POINT.

IF SOMEONE WERE TO SAY IF WE DID ANOTHER MILLIONAIRE'S TAX THIS YEAR, ALL OF OUR PROBLEMS GO AWAY, THAT WOULD BE A PERSUASIVE ARGUMENT.

BUT IT DOESN'T CURE THE ROOT PROBLEM THAT WE HAVE HERE.

YOU'RE NOT GOING TO FIX NEW JERSEY TRANSIT WITH THIS MILLIONAIRE'S TAX.

YOU'RE NOT GOING TO FIX THE SCHOOLS WITH THIS MILLIONAIRE'S TAX.

>> IT HELPS.

>> IT HELPS, BUT IT DOESN'T DO ENOUGH TO MAKE AN IMPACTFUL CHANGE IN THOSE AREAS.

WITH E HAVE TO WORK THE OTHER SIDE OF THE EQUATION WHICH IS WE HAVE TO GET THESE LEGACY ISSUES UNDER CONTROL.

AND THAT'S WHERE THIS DISCUSSION OF PATHWAY TO PROGRESS COMES INTO PLAY.

>> WE'LL GET TO THAT PATHWAY TO PROGRESS I HOPE.

BUT ASSEMBLYMAN DE MAYO, YOUR PARTY HAS BEEN RAILING AGAINST HIGH TAXES IN THE STATE FOR A DECADE OR MORE.

CLEARLY YOU MUST OPPOSE THE MILLIONAIRE'S TAX.

AM I RIGHT?

>> YES, WITHOUT A DOUBT, MICHAEL.

I LIVE IN THE WESTERN PART OF THE STATE OF NEW JERSEY, AND I REPRESENT PARTS OF HUNTERTON, WARREN.

AND WE CAN SEE A SHIFT OF RESIDENTS FROM WARREN COUNTY AND HUNTER COUNTY INTO PENNSYLVANIA.

THERE'S NO DOUBT ABOUT IT.

WHERE THEY HAVE A 3.07% FLAT INCOME TAX RATE.

PEOPLE WHO MAKE GOOD MONEY ARE PRETTY SMART PEOPLE, AND THEY CAN FIGURE OUT WHERE TO GO TO AVOID THESE THINGS.

AS WE LOSE THOSE FOLKS AND IF WE LOSE MORE OF THEM, I AGREE WE SHOULDN'T RAISE THIS TAX RIGHT NOW.

WE SHOULDN'T RAISE IT AT ALL.

WE RECOLLECTED LOOK AT EFFICIENCIES WITHIN THE BUDGET.

WE NEED TO LOOK AT THINGS LIKE HOW SCHOOLS ARE STRUCTURED.

WE MIGHT NOT HAVE 600 SCHOOL DISTRICTS WITH CHIEF ADMINISTRATORS DOWN THE ROAD BECAUSE IT'S MORE EFFICIENT TO RUN IN A SMART SIZE TYPE SCHOOL DISTRICT WHERE YOU CAN HAVE K-12 DISTRICTS RATHER THAN K-8 -- >> THAT'S PART OF THE PROGRESS WHICH I STILL THINK WE'RE GOING TO GET TO IN A FEW MINUTES.

>> BUT I AGREE WITH A LOT OF THAT PATH TO PROGRESS BECAUSE WE NEED TO BE SMARTER ABOUT HOW WE DELIVER SERVICES AND LOOK FOR WAYS TO SAVE MONEY BECAUSE IT CAN'T ALWAYS BE GOING BACK TO THE TAXPAYER.

WITH REGARD TO THE GOVERNOR'S MILLIONAIRE TAX AND PROPERTY TAX RELIEF, I WAS A MAYOR WHEN AID CAME IN, I CUT PROPERTY TAXES BY 17%.

>> YOU HIKED THE STATE INCOME TAX.

>> AND OVERTIME, THOSE AID NUMBERS HAVE BEEN WIDDLED AWAY AND THERE'S NO WAY TO GUARANTEE THAT IF HE SHIFT THAT MILLIONAIRE'S TAX INTO PROPERTY TAX RELIEF IT'S NOT GOING TO FIND ITS WAY BACK INTO THE STATE BUDGET AND HELP OUT WITH THE PROPERTY TAXPAYER.

WE NEED A LONG TERM SOLUTION TO PROPERTY TAXES TO HELP OUR PEOPLE OUT.

>> WE'VE BEEN HEARING THAT 40 YEARS.

>> NO LESS TRUE NOW THAN IT WAS THEN.

PEOPLE BUY A HOUSE AND CAN'T AFFORD THE COST TO OPERATE THE HOUSE.

RIGHT NOW IT'S SO EXTREME WE'RE LOSING A LOT OF YOUNG FOLKS FROM NEW JERSEY.

>> POLITICALLY, THE MILLIONAIRES TAX LOOKS LIKE IT'S IN TROUBLE.

DOESN'T SEEM TO HAVE A WHOLE LOT OF SUPPORT IN THE LEGISLATURE.

BUT THE GOVERNOR IS SAYING HE WON'T SIGN A BUDGET THAT DOESN'T INCLUDE A MILLIONAIRE'S TAX.

IS HE EVENTUALLY GOING TO HAVE TO BACK DOWN FROM THAT?

>> I THINK MICHAEL YOU'VE BEEN AROUND THIS A LONG TIME.

JOHN HAS FROM THE LOCAL LEVEL IN THE LEGISLATURE.

THERE'S ALWAYS A COMPROMISE TO BE REACHED THAT MAY NOT INCLUDE ALL THE PIECES YOU WANT IN ONE AREA.

BUT MAYBE THERE'S SOMETHING ELSE THAT YOU CAN ACHIEVE THAT YOU CAN BE WILLING TO SET ASIDE THAT ONE POINT TO ESTABLISH SOMETHING ELSE.

>> LIKE WHY HERE?

WHAT ARE YOU HINTING AT?

>> OH, I WOULDN'T SAY I'M HINTING AT ANYTHING OTHER THAN TO SAY TO YOU THAT THE PROCESS OF NEGOTIATION WILL BRING ABOUT COMPROMISE OF SOME KIND.

>> COULD IT BE LIKE LAST YEAR WHERE INSTEAD OF MILLION DOLLAR THRESHOLD IT WAS 500,000 THRESHOLD.

SO, THIS YEAR LET'S MAKE THE THRESHOLD $2 MILLION.

IS THAT A COMPROMISE THAT'S EVEN WITHIN THE REALM OF POSSIBILITY?

>> I WOULDN'T BE IN A POSITION TO SAY TO YOU WHAT'S BEING TALKED ABOUT IN THESE MEETINGS.

BUT I CAN TELL YOU THAT THERE IS NOT AN APPETITE ON THE PART OF THE DEMOCRAT MAJORITY TO RAISE ANY TAXES AT THIS TIME.

>> WHY?

>> BECAUSE THE SIMPLE POINT THAT WE THINK BASED ON THE REVENUE WE'RE RECEIVING, TAXES THAT ARE BEING IMPOSED UPON PEOPLE ARE GENERATING ENOUGH REVENUE TO RUN THE STATE.

>> SO, DOES THAT MEAN WE'RE HEADED TOWARD A SHUTDOWN IF THE GOVERNOR HOLDS ON TO HIS POSITION PAST JUNE 30th?

>> I WOULD HOPE THAT THAT WOULDN'T BE NECESSARY.

IT WOULDN'T BE THE FIRST TIME.

AND -- BUT EVENTUALLY THERE WILL BE A BUDGET.

BUT I WOULD HOPE THIS WOULD BE RESOLVED BY JULY 1st.

BY JUNE 30th.

I DON'T SEE A REASON WHY IT CAN'T BE BECAUSE AGAIN WE'RE FORTUNATE THAT THE ECONOMY HAS HELPED US AND THERE'S MONEY TO WORK WITH AND THE DOCUMENT WE'RE SENDING THE GOVERNOR AS I MENTIONED AT THE TOP OF THE PROGRAM HAS A LARGER SURPLUS THAN THE DOCUMENT HE SENT US AND ACCOMPLISHES FOR HIM THE PRIORITIES HE ASKED FOR.

>> WOULD YOU LIKE TO SEE THE DEMOCRATS FIGHTING WITH ONE ANOTHER TO THE POINT THEY HAVE TO ENGAGE IN A SHUTDOWN AND TARNISH THEIR REPUTATIONS TO THAT DEGREE?

>> LISTEN, POLITICS ASIDE, THIS IS ABOUT THE BUSINESS OF THE PEOPLE OF THE STATE OF NEW JERSEY.

AND IN MY DISCUSSION WITH THE BUDGET CHAIR YESTERDAY, WE TALKED OFF LINE ABOUT MONDAY.

IF WE CAN GET EVERYTHING DONE MONDAY, STAY LATE, WE DECIDED WE'LL STAY LATE AS WE HAVE TO.

IF WE CAN'T GET IT DONE, WE'LL BE BACK TUESDAY WITH REGARD TO THE COMMITTEE WORK.

>> SO, YOU'RE EXPECTING A FULL COMMITTEE HEARING ON THE BUDGET ON MONDAY.

>> I BELIEVE SO.

>> OKAY.

>> AND I BELIEVE THAT THE SPEAKER HAS PUT US ON CALL FOR MONDAY, TUESDAY, AND WEDNESDAY.

SO, BY THURSDAY THERE SHOULD BE A DOCUMENT READY TO BE VOTED ON.

AND IF WE GET -- NO MATTER WHAT WAY ANY MEMBERS VOTE -- I CAN'T TELL YOU HOW ANYBODY'S GOING TO VOTE UNTIL WE SEE THE FINAL DOCUMENT.

BUT I BELIEVE IF WE FINISH THIS BY THURSDAY, THERE'S MORE THAN ADEQUATE TIME FOR THE GOVERNOR TO ACT.

AND I CAN CALL IT.

IT WOULD SEEM TO ME THAT HE'LL OWN THIS SHUTDOWN.

HE'LL HAVE A BUDGET.

>> HOW IS THE STATE FAIRING UNDER GOVERNOR MURPHY?

>> I WOULD SAY -- EXCUSE ME.

DESPITE WHAT SOME PEOPLE MAY THINK, GENERALLY WE'VE HAD A LOT OF PROGRESS IN PROGRAMS THAT MATTER, WHETHER IT BE MINIMUM WAGE, WHETHER IT BE WOMEN'S HEALTH ISSUES.

THERE'S BEEN SIGNIFICANT PROGRESS MADE.

SO, ASIDE FROM THE OCCASIONAL ARGUMENTS THAT BUBBLE UP, I THINK THERE'S A DECENT RECORD TO STAND ON.

NOW, HOW PEOPLE FEEL ABOUT THE GOVERNOR, THAT'S THEIR CHOICE AND THEIR INTERPRETATION AS THEY SEE THINGS UNFOLDING.

BUT, YOU KNOW, WE'RE MAKING PROGRESS IN MANY AREAS.

>> YOU'RE PUTTING A BAND AID ON A DEEP WOUND THAT SEEMS TO HAVE ERUPTED WITHIN THE PAST MONTH BETWEEN YOUR FELLOW SOUTH JERSEY DEMOCRATS AND THE GOVERNOR.

ISN'T THERE REALLY A WAR GOING ON?

>> WELL, I THINK YOU HAVE TO KEEP THESE THINGS IN COMPARTMENTS.

THERE IS CLEARLY SOME CONTENTION IN CERTAIN AREAS.

BUT NOT IN ALL AREAS.

SO, WE AS LEGISLATORS HAVE TO BE CLEAR MINDED ENOUGH TO KNOW WHEN WE'RE NOT AGREEING AND WHERE WE CAN AGREE.

AND I THINK THAT WE'RE WALKING THROUGH THAT PRETTY WELL.

SO, THE BUSINESS OF THE STATE CONTINUES.

BUDGET'S GOING TO BE ADOPTED.

IT'S A SOUND BUDGET.

IT'LL BE A BALANCED BUDGET.

AND THE OTHER ISSUES THAT ARE BEING THOUGHT OUT WILL EVENTUALLY BE CONCLUDED.

>> WHAT'S YOUR TAKE ON THE WAR THAT HAS ERUPTED BETWEEN FACTIONS OF THE DEMOCRATIC PARTY?

THAT'S THEIR BUSINESS?

>> I'LL STICK WITH THAT FOR NOW.

BUT THERE'S A COUPLE THINGS I WOULD LIKE TO SAY WITH REGARD TO THE GOVERNOR'S FIRST TWO BUDGETS.

FIRST OF ALL, WE WILL BE -- IF THE SAME AMOUNT OF MONEY IS PASSED, $38.6 BILLION, WE'LL BE UP SOMEWHERE IN THE NEIGHBOR HOOD OF 3.9 BILLION FROM THE LAST ADOPTED BUDGET OF GOVERNOR CHRISTY UNTIL THIS ONE'S ADOPTED.

WHICH THAT INCLUDES THE GOVERNOR PROPORTED 1.1 BILLION OR SO OF SAVINGS FOLDED IN THERE.

>> YOU DON'T BUY THAT IT'S REAL?

>> I'M NOT SAYING I BUY THEM OR NOT.

BUT IT'S LAUDABLE THAT THE GOVERNOR FOUND SAVINGS.

EVEN WITH SAVINGS WE ADD THAT TO -- >> REPUBLICANS HAVE BEEN CALLING FOR SAVINGS FOR YEARS AND HE FOUND A BILLION DOLLARS.

>> BUT HE ALSO SPENT A BILLION PLUS OF NEW SPENDING.

VERY LAUDABLE HE FOUND MONEY TO CUT.

AND ONE MORE THING ON REVENUES, THE HIGHER REVENUES GET, THE MORE LIKELIHOOD MONEY IS SPENT.

SO, BACK TO THE MILLIONAIRE'S TAX.

IF WE ADD THIS 500 AND SOME ODD MILLION DOLLARS TO THE BUDGET, IT'LL BE GONE.

AND IT'S NOT LIKE IT'S GOING TO FIND A SUBSTANTIVE PLACE WITH REGARD TO TAX RELIEF.

IF WE TOOK THE 500 MILLION AND GUARANTEED IT WOULD SAY WITH THE MUNICIPALITIES -- HE MOVED ON BUDGET AND TOOK 788 OUT OF THE PROPERTY RELIEF FUND TO SEND TO THE MUNICIPALITIES.

SO, THAT'S THE KIND OF THINGS THAT CAN HAPPEN OVER TIME IF WE'RE NOT CAREFUL.

WE NEED TO FIND A WAY TO COMPARTMENTALIZE OUR REVENUE AND GET BACK TO PROPERLY FUNDING EDUCATION AT THE LOCAL LEVEL AND FIND A WAY TO PROPERLY FUND THE MUNICIPALITIES AT THE LOCAL LEVEL SO THAT WE CAN MANDATE THAT THAT MONEY GO BACK TO PROPERTY TAX RELIEF.

>> ANYTHING YOU DISAGREE WITH?

>> I'LL JUST ADD THIS BUDGET WILL HAVE A RECORD PENSION PAYMENT WHICH IS SIGNIFICANT, WILL HAVE RECORD SPENDING FOR PUBLIC EDUCATION, WILL HAVE ENHANCED OPPORTUNITIES FOR PEOPLE TO GO TO COMMUNITY COLLEGES.

THERE'S A PRICETAG TO ALL THIS.

PENSION IS AN OBLIGATION WE HAVE TO MEET.

WE HAVE TO CONTINUE TO STRIVE TO DO BETTER, HAVE REFORMS, SQUEEZE MORE MONEY.

BUT THE TAXPAYERS ARE PAYING ENOUGH.

>> YOU BOTH ILLUDED TO THE PATH TO PROGRESS EARLIER IN THE INTERVIEW.

THAT'S SENATE PRESIDENT STEVE SWEENEY'S 27-BILL PACKAGE AIMED AT REFORMING THE STATE'S FISCAL AFFAIRS.

THE NUMBER ONE ITEM IN THE LIST IS PENSION REFORM AND HEALTH BENEFITS REFORM FOR PUBLIC EMPLOYEES.

AS YOU BOTH KNOW THERE WAS A HUGE RALLY AT THE STATE HOUSE THURSDAY WHERE PUBLIC EMPLOYEES AND PROGRESSIVE GROUPS SAID DON'T -- NO MORE PENSION CUT BACKS ON THE POOR PUBLIC EMPLOYEE WORK FORCE.

IS THIS PARALLEL LEGISLATIVE AGENDA THAT THE SENATE PRESIDENT HAS BEEN PUSHING FOR A YEAR GOING TO LIE WITH THE GOVERNOR'S OWN AGENDA AS THE BUDGET GOES FORWARD?

HOW DO THEY RELATE TO ONE ANOTHER?

>> I THINK THE GOVERNOR HAS SPOKEN PUBLICLY.

HE THINKS CERTAIN THINGS SHOULD BE COLLECTIVELY BARGAINED.

SENATE PRESIDENT'S POSITION IS VERY CLEAR THAT THERE IS A PROCESS EQUAL TO COLLECTIVE BARGAINING RELATED TO THE HEALTH BENEFITS AND WORKING ON THE PENSION SYSTEM.

AND THESE -- >> HE'S SAYING YOU CAN DO IT BY LEGISLATION.

YOU DON'T HAVE TO COLLECTIVELY BARGAIN.

>> BECAUSE HISTORICALLY A LOT OF IT HAS BEEN DONE LEGISLATIVELY IN THE PAST.

AND I WOULD SAY TO THE BROTHERS AND SISTERS THAT MAKE UP THOSE UNIONS WHO ARE ALL FRIENDS THAT EVERYONE'S GOT TO RELAX A BIT AND LOOK AT THIS WITH OPEN EYES BECAUSE UNLESS WE DO THESE THINGS, THE QUESTION OF PENSION PLAN SURVIVING IS A QUESTION.

>> WHERE DOES MURPHY STAND ON THAT?

>> I'M NOT GOING TO SPEAK FOR THE GOVERNOR.

I CAN ONLY SPEAK FOR THE HOUSE I'M WORKING IN.

AS I SAID, THE GOVERNOR SEEMS TO THINK IT SHOULD BE HANDLED IN A DIFFERENT WAY.

HERE'S SOMETHING I SAID PUBLICLY, I'LL SAY AGAIN.

NEW JERSEY RESIDENTS ACROSS THE STATE ARE CALLING FOR REFORM.

THEY JUST DON'T LIKE THE IDEA OF CHANGE.

THAT'S A VERY HARD DYNAMIC TO WORK IN.

WANT REFORM, DON'T WANT CHANGE.

>> THAT'S A TOUGH PLACE TO BE, I THINK.

>> AND THAT'S WHERE WE ARE.

>> AND ANOTHER PIECE OF THE PATH TO PROGRESS, PROBABLY THE SECOND MOST TALKED ABOUT PIECE IS SOMETHING YOU ILLUDED TO EARLIER WHICH IS SCHOOL REORGANIZATION.

THE SWEENEY PLAN WOULD CONSOLIDATE ALL K-6 DISTRICTS AND K-8 DISTRICTS WITH THE NEAREST K-12 DISTRICT ELIMINATING A LOT OF ADMINISTRATIVE COSTS.

DO YOU SUPPORT THAT?

>> MAKES A LOT OF SENSE.

>> YEAH?

>> MAKES A LOT OF SENSE.

LISTEN, OTHER STATES GO BY COUNTY-WIDE BASIS.

SOMETIMES THEY MAKE DISTRICTS TOO BIG AND THEY BECOME HARD TO MANAGE AND SOMETIMES NOT EFFICIENT AS THE RIGHT SIZED SCHOOL DISTRICTS.

BUT WE'VE COME TO A TIME.

LISTEN, I'VE RECOGNIZED ONE THING.

ANY TIME YOU TALK ABOUT CHANGE, PEOPLE FEAR CHANGE.

IT GETS THEM OUT OF THEIR COMFORT ZONE.

AND AS SENATOR BURS CHELLY SAID LET'S TALK ABOUT THIS OR WORK OUR WAY THROUGH THE PROCESS OR THIS STATE IS GOING TO BECOME UNAFFORDABLE TO MORE PEOPLE.

WE'RE EDUCATING PEOPLE K-12 EARLIER AND THAT 200,000 PLUS INVESTMENT WE'RE MAKING, A LOT OF TIMES LEAVES THE STATE BEFORE WE GET ANY BENEFIT FROM THEIR EDUCATION.

>> $200,000 PER CHILD.

>> PER CHILD, ROUGHLY IN THAT NEIGHBORHOOD.

WE NEED TO MAKE CHANGES.

GETTING BACK TO THE PENSION SYSTEM.

I HAVE A DAUGHTER WHO'S BEEN A POLICE OFFICER FOR FIVE YEARS NOW.

AND THE LAST THING I WOULD WANT TO SEE HER AT THE END OF HER 30-YEAR CAREER WOULD NOT HAVE A PENSION SYSTEM AFTER PUTTING ALL THAT MONEY IN.

WE WILL NEVER EVER MAKE DECISIONS AS ELECTED OFFICIALS THAT ARE THIS CONTROVERSIAL IF THEY'RE NOT NECESSARY.

THE WORSE THING IN THE WORLD FOR SOMEBODY WHO HAS THEIR PENSION ALREADY, LET'S SAY THEY'RE FIVE YEARS FROM RETIRING, IS TO BE 75 YEARS OLD AND THAT CHECK STOPS COMING IN.

THAT WOULD BE FAR WORSE THAN MAKING ADJUSTMENTS IN SOME KIND OF EQUITABLE WAY WE CAN MAKE THESE THINGS SURVIVE.

>> ON THAT NOTE, WE'RE OUT OF TIME.

THANK YOU BOTH VERY MUCH FOR GIVING US A GOOD SENSE OF HOW THINGS STAND IN TRENTON.

WE'LL BE BACK NEXT WEEKEND WITH "ON THE RECORD" AND "REPORTER'S ROUND TABLE."

BOTH PROGRAMS ARE ONLINE ON NJTV.ORG.

YOU CAN FOLLOW US ON FACEBOOK AND YOUTUBE.

I'M MICHAEL AARON.

THANKS FOR WATCHING.

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